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This article delves briefly into how acquisition cost and capital gains for cryptocurrency are calculated in France. We'll then explore the changes that shape how crypto assets are taxed, post-2018.
Calculating the Acquisition Cost of a sold asset in France involves several factors:
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The Total Acquisition Cost to Date
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The Acquisition Cost Allocated to Previous Sales
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The Portfolio Value
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The Sale Price
The formula for calculating capital gains on a sale of cryptocurrency for euros is:
Sale Price - ((Total Acquisition Costs - Previously Allocated Costs) * Sale Price) / Portfolio Value.
Let's look at an example to understand how this works for a transaction.
🔍 Capital Gains Example
Let's examine a practical example to understand the gains made on cryptocurrency sales. Consider these transactions:
| Date | Type | Amount | Price |
|---|---|---|---|
| 01/01/2023 | Purchase | 1 ETH | €10,000 |
| 07/08/2023 | Sale | 1 ETH | €20,000 |
Calculating Profit:
To calculate the profit, follow this formula:
Profit = Sale Price - ((Total Acquisition Costs - Previously allocated costs) * Sale Price) / Portfolio Value
Profit = €20,000 - (€10,000 * €20,000 / €20,000)
Profit = €20,000 - €10,000
Profit = €10,000
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Capital Gains Tax Regime After January 1st, 2019
However, the tax regime regarding capital gains on digital currencies came into effect on January 1st, 2019.
If you've acquired cryptocurrencies before this date that you had yet to sell, you cannot simply use all acquisition costs to date for transactions prior to 2019 as part of your total acquisition cost for capital gains calculations.
Only the acquisition costs of crypto held at the time the regulations came into effect can be used for the total acquisition cost.
To calculate this, we must use the average cost basis method for transactions prior to 2018. This method helps find the acquisition costs of the cryptocurrencies remaining at the end of 2018, which will be used for capital gain calculations going forward.
